In this week’s blog I wanted to highlight some of the key financial decisions that will shape your financial future as a doctor.
These thoughts are based on my experience in working with doctors from all ages and different financial successful levels.
Unfortunately, as I have mentioned before, many doctors are not as financially well-off as they should be, and often the cause lies in one or more of the following areas.
1) Buying a house
Spending too much on your primary residence has to be the biggest financial mistake made by too many doctors. It is unfortunately not uncommon for me to see doctors in their mid to late fifties with million dollar mortgages. Almost invariably they experience high stress levels because of their debt position, as it affects their lifestyle and retirement options.
Whilst some advisers to the medical industry advocate buying the most expensive home you can afford to buy, I sincerely believe this is one of the quickest ways to financial ruin.
High amounts of non-deductible debt are a serious obstacle towards building wealth due to the opportunity cost of bad debt, which is compounded by the risk of investing millions of dollars into a single asset.
You can read some more about my thoughts around property in the following articles:
2) Deciding whether to go into private practice
Do I believe that doctors need to be in private practice to be financially successful? Not at all. I have worked with plenty of doctors who exclusively work(ed) in the public sector and are in much better financial shape than their colleagues who work in the private sector. One of the main differences there is that employed doctors typically accumulate significant super balances throughout their career, in often very generous state government schemes. Obviously, that’s not the only reason.
Nevertheless, there is no doubt though that going into private practice, whether part-time or full-time, can be a real wealth creation accelerator for the following reasons:
– typically you earn a higher income, which gives you a greater capacity to repay debt, save and invest;
– there may be tax planning opportunities that allow you to split business income in a tax-effective way with lower-taxed beneficiaries (read more HERE);
– you may be able to build a saleable practice and build ‘goodwill’ value, which can provide a boost to your retirement savings.
You can find a useful video and podcast here:
3) Seeking advice
Whilst it may seem obvious that I am a big believer in the value of financial advice for doctors, this belief is based on my experiences in working with many different doctors, and having seen firsthand the benefits we have achieved for our clients, the opportunities we have created/seized and the risks we have eliminated or mitigated.
Let me provide some examples:
– savings in insurance premiums of over $10,000 p.a. resulting in hundreds of thousands of savings over the years;
– home loan debt repayment in under 10 years through the focus we provide, where clients thought it would take them 20 years; achieving savings worth hundreds of thousands of dollars.
– maximising super strategies, savings tens of thousands of dollars in tax per annum, where clients had not even considered making extra contributions.
See some further examples of client outcomes HERE.
It is a cliché, but the sooner you start planning your financial future, the better, as the compounding benefits are what matters. We are therefore very grateful to be working with many young medical clients who take our advice on board and are taking control over the financial outcomes they wish to achieve.
If you believe that you are currently not achieving the financial outcomes you deserve, or if you would just like to talk in confidence about your current position and your goals, please feel free to contact me on Yves@affluenceprivate.com.au or call me personally on 08 9381 2704. I would love to talk to you.